Barclays
BCS 0.31%
PLC said Chief Executive
Jes Staley
will keep his job after British regulators concluded his attempts to unmask a whistleblower didn’t represent a “lack of integrity” and instead chose to slap the executive with a fine.

The London-based bank said it still backed Mr. Staley, ending a year of instability for the CEO and drawing a line under a major unknown that has weighed on Barclays as it looks to push on from a major restructuring. The case was also the first major test of the new U.K. “Senior Managers Regime,” a set of regulatory rules aimed at ensuring bank executives are held responsible for their actions. The U.K. recently bolstered rules to protect whistleblowers.

Barclays had flagged to regulators last year Mr. Staley’s attempts to reveal the identity of a whistleblower who criticized a hire that the CEO made. Mr. Staley apologised for making the attempts. The move prompted a yearlong probe and fears among some investors and staff that the chief executive could be deemed unfit to run a bank. On Friday, the bank said the U.K.’s Financial Conduct Authority and Prudential Regulation Authority concluded that Mr. Staley didn’t act “with a lack of integrity or that he lacks fitness and propriety to continue to perform his role.”

However, Mr. Staley does face a fine and Barclays’s board has already said it would dock some of his 2016 pay over the debacle.

Mr. Staley’s total financial penalty could hit seven figures, a person familiar with the bank said. In a statement, U.K. regulators said they had “drafted warning notices” related to the CEO and declined to comment on the size of a fine.

Barclays said it couldn’t comment on the outcome of the probe because Mr. Staley still has the right to challenge the fine. It said Mr. Staley wasn’t available to comment.

The end of the investigation, and the bank’s support, clears the way for Mr. Staley to focus on running the lender, which is wrestling with a deeper problem: whether its investment bank can generate strong profits and allay some investors’ long-held concerns that it needs to shrink drastically. That pressure ratcheted up recently after activist Sherborne Investors Management LP said it had taken a 5.2% stake in Barclays.

The New York Department of Financial Services is still probing Mr. Staley and Barclays over the matter, according to a person familiar with the matter. The probe may result in a fine, but lawyers say a ban of Mr. Staley is unlikely given U.K. regulators’ support of him.

The investigation into Mr. Staley has proved an awkward distraction. In the summer of 2016, Mr. Staley twice tried to identify the source of an anonymous letter to a senior executive that criticized the hiring of Tim Main, who was named as Barclays’s head of financial institutions group, according to people with knowledge of the events. That letter also raised questions about Mr. Staley’s dealings with Mr. Main when they worked together at
JPMorgan Chase
& Co.

Barclays commissioned its own probe and shared its findings with U.K. regulators. The bank concluded that Mr. Staley honestly, but mistakenly, believed that it was permissible to identify the author of the letter.

Mr. Staley later apologized for his actions and the whistleblower’s identity was never revealed. However, investors fretted that regulators would deem Mr. Staley unfit to run a major bank—an outcome that would have prompted another managerial shuffle at a lender that has gone through four bosses in five years.

Mr. Staley’s efforts to find the source of the letter came just as British regulators were tightening protections for whistleblowers. Regulators had to prove they were acting on the accusations without destabilizing one of the U.K.’s biggest banks.

Some industry watchers question whether the watchdogs’ decision to spare Mr. Staley undermines their stated desire to protect whistleblowers. “The magnitude of banning the sitting CEO of such a systemically important institution made outcomes other than a fine unlikely,” said
Nicholas Querée,
a lawyer at Peters & Peters Solicitors LLP. “The case does set an interesting precedent,” he added, showing executives can use their power to try to unmask a whistleblower “and remain in a regulated post.”

Barclays said a separate probe into how the bank handles whistleblowing hasn’t resulted in an enforcement action but they will have to make some changes to the way it operates.

In recent years, Barclays has faced a series of regulatory action. Last month the bank paid pay $2 billion in civil penalties to resolve U.S. Justice Department claims that the U.K. lender fraudulently sold mortgage securities that helped fuel the financial crisis.